If I passed means test, why does lawyer want me to find more expenses?

[nickifan]

Hi,

I most likely will be filing next week...alas, too late to avoid the judgment a creditor got against me at the trial I did not attend. Lawyer says if we file within 30 days of that judgment thought I am fine.

However, lawyer sent email today with a list of commonly overlooked expenses and said to look them over, as it appears I have a "few hundred dollars left over each month". But when I asked if there's a certain amount of disposable income that triggers a push for Ch 13 (my biggest worry) lawyer said I passed means test and not to worry, that I'm ok for a Ch 7. So why do I need to find a few more expenses that I may have overlooked??

Also. lawyer said I need to have a bank statement of what I have in bank on the DAY I file...is whatever it says online ok for a printout or do I need to go to bank and get something special for THAT day??

I posted a thread a few months ago that the good news was I had gotten a $2 an hour raise; the bad news was it JUST put me over the new Texas median income! When I first met the attorney in Dec 2009 I wasn't working at all...I've had a full time job since January and that's great...but I also wanted to wait to file until I had health insurance and that wasn't until June 1st...so now of course I'm second-guessing all these decisions and wish I would've done it sooner when I wasn't worried about having "too much" income!

Anyway, thanks for any input.

[LadyInTheRed]

It sounds like you pass the means test but are showing disposible income on your schedules I/J. This would happen if your actual expenses are less than the expenses allowed on the means test per local and national standards. Your attorney is trying to avoid an objection to discharge based on totality of circumstances. So, look over the expense list your attorney provided and make sure you have included everything. Remember, just because you have deprived yourself of certain things while struggling to pay your debt doesn't mean they aren't valid necessary expenses. For example, you may not have been able to afford to buy clothing for a while or you might have put off having dental work done.

Ask your lawyer about the bank statement. But, usually you provide a copy of the monthly statement that includes the date of your filing. It doesn't have to be provided at the time you file. If your attorney wants confirmation of the balance on the date you filed for his file, the online printout should be fine.

[btbeme]

Expenses can be strange things in the upside-down crazy straw logic that is the bankruptcy system.

The federal guidelines for certain expenses are a safe number to use. It is when you exceed any of those numbers that you can find trouble, unless you can back them up. For instance, we claimed quite high expenses for medical prescriptions. We were able to do so because our two adopted daughters are both special needs and require a dizzying array of meds to keep them vertical. You can bet that we had all of the costs verified with receipts - including a summary from the drug store for the last 12 months showing what we had to spend, even though we have terrific insurance.

As Lady says, some things that are completely allowable are things that you may have been skimping on as you burned through your cash in the hopes of staying afloat. If your actual expenses are lower than the federal or state guidelines because you have gone without, you can certainly make a valid claim to the reasonable amount you would have spent on necessities had you the money to do so.

Sounds like you have a good attorney watching your back. Trust him/her and do exactly what your attorney suggests. Remember - BK attorneys serve two masters, and cannot ethically tell you some of the things they used to be able to say out loud before the bankruptcy "reforms" a few years ago. But, in an hour or two, you can find those suggestions in these forums.

If you DO find something that might be of value to you, pass it by your attorney. Even though he might not be able to tell you to do it, he CAN tell you if it is beneficial to your filing.

[nickifan]

Thanks, Lady and Btbeme! Lady, you hit the nail on the head about expenses that were put off...I am currently paying monthly for an $1100 dental crown and have to get another one when I finish that. Also seeing the eye doc (no pun intended) and need to start all that "routine" medical stuff I wasn't doing before. As I have a $3000 deductible, for all practical purposes it's all out of pocket. I also know it doesn't count, but I do plan to repay a few personal loans when this is over, so my "excess" money really isn't.

Btbeme, can you whisper in my ear an example of what the lawyers "used to say out loud"?
Is is just like, if you spend $30 on cosmetics and toiletries, write down $50 or something like that? I did realize that I spend probably $15-20 on all the supplies for contact lenses and there was no category per se for it on the paperwork I filled out for the attorney. There's also a category for non-prescription meds and vitamins; again -- expenses I didn't spend but want to now, but can't "show" that I've already done.

I read here somewhere, I think, that the irony is that people who have been struggling and trying to live as frugally as possible don't have the expenses to help pass the Schedules that the more profligate people do. For example, I drive a 9-year-old paid-for car; someone else could have a $300 monthly car note and that's all they need to take care of the "extra" income. I'd hate to think I've gone thru all this and could get a challenge of "abuse" because maybe I have $200 left at the end of the month.

I just turned 62...and I've only been working again full time since January after close to a year of looking for work. If I got pushed into a 13 - that means I'd better have a job for the next 5 years, right? I'd have no choice but to keep working right up until I can get SS! What do people on Ch 13 plans DO if they lose their jobs???

Anyway...thanks again for weighing in. Appreciate it.

P.S. I also called my car insurer yesterday and asked for a fast quote on life insurance (which I also have done without.) I'll get the quote Monday and may just go ahead with it -- I told the agent I'd need the debit done immediately.

[btbeme]

Whispering in your ear is not something I care to do before being appointed to the Supreme Court, but the forums herein are littered with advice... Just like Wheel of Fortune, you sometimes have to take your best stab at the missing letters.

Yes, you are right. Driving a paid-for car, rather than one with a lien on it, is actually a disadvantage from an exemptions standpoint. Go figure. Just remember - that institution called Congress writes the BK laws. I am reminded of an old Reagan quote: "The most fearsome words you may ever hear are 'I'm from the government, and I'm here to help.'"

But don't ever think about "playing cute" with a Trustee. There are valid, solid, and legal tests for exemptions. Don't use your own interpretation of them and expect the Trustee to play along. The only thing you might win is a beautiful pair of striped pajamas. Don't shade the truth. Don't sell your soul. Just know what is legal and what is not; and what the Trustees in your district will and will not investigate deeply. Your best source for this info is your local well-informed BK attorney. It is indeed unfortunate that YOU sometimes have to come up with the answer to have it blessed by the attorney. But, dig around in these forums to find some interesting and valid answers to questions you probably have. In some cases, the simple answer is that what the state and/or federal guidelines allow you to claim are completely valid. All you have to do is prove that you and your expenses are "normal" according to the acceptable guidelines. Weird, huh?

That Means Test cuts both ways. If your car doesn't not have a lien, and that exemption alone is what keeps you from a Ch 7 (and kicks you into the indentured servitude of a Ch 13)... there are many ways to get a valid, legal, and honest lien.

And so forth.

But always always ALWAYS tell the truth. And document everything. And expect to have to check with your attorney first and then have to explain it to the Trustee with an honest heart. Because if you cannot, you can be made a poster child.

[Scooter10]

Hi,

I most likely will be filing next week...alas, too late to avoid the judgment a creditor got against me at the trial I did not attend. Lawyer says if we file within 30 days of that judgment thought I am fine.

However, lawyer sent email today with a list of commonly overlooked expenses and said to look them over, as it appears I have a "few hundred dollars left over each month". But when I asked if there's a certain amount of disposable income that triggers a push for Ch 13 (my biggest worry) lawyer said I passed means test and not to worry, that I'm ok for a Ch 7. So why do I need to find a few more expenses that I may have overlooked??

Also. lawyer said I need to have a bank statement of what I have in bank on the DAY I file...is whatever it says online ok for a printout or do I need to go to bank and get something special for THAT day??

I posted a thread a few months ago that the good news was I had gotten a $2 an hour raise; the bad news was it JUST put me over the new Texas median income! When I first met the attorney in Dec 2009 I wasn't working at all...I've had a full time job since January and that's great...but I also wanted to wait to file until I had health insurance and that wasn't until June 1st...so now of course I'm second-guessing all these decisions and wish I would've done it sooner when I wasn't worried about having "too much" income!

Anyway, thanks for any input.

Seems like your on track. What your lawyer is saying is a very valid point. Go "find" the exspense you might have overlooked. Your lawyer is a professional and he knows what your local BK goes by and looks for. If he is saying go get some more exspense I would. This is from a BK7 filer with over 100K year income and everything was discharged.

[ValleYum]

Just a thought - make sure you check your deductibles on your insurance policies. Lots of us bumped them up thinking we could use a credit card if we needed to file a claim to cover the difference. After a BK you won't have the credit card to fall back on - so you may need to reduce your deductibles. This will in turn increase your insurance premiums which are an allowed expense on Schedule J.

Still on insurance, your insurance may go up after you file a BK - your attorney can tell you if this is his experience and if you should budget for higher premiums due to this possibility.

Now may be a good time to buy term life insurance or get renter's insurance if you need it.

LOL I don't sell insurance - I just find this an overlooked area. Good luck!

[nickifan]

Now I'm getting more anxious about everything to do with the expenses! I don't have tons of receipts and can't "prove" everything I put down...and I still don't quite "get" how to handle what I didn't spend on before but do want or need to spend on going forward!

I'm actually thinking maybe we should wait for me to get more expenses... but then I would have the problem of not filing before the 30 days of the creditor judgment against me so it would be permanent (lawyer said "no problem" if we file within 30 days)... jeez I just HATE this!!!

I am getting a life insurance quote tomorrow...I was going to ask the attorney tomorrow if I should do it but I think I just will. Don't know if it's for life or term...at 62 I guess term probably makes more sense but my mother lived to 99....

I was so happy Friday when lawyer said "there is no bar to you filing Ch 7" but of course lawyer is relying on validity of all my expenses. I'm going to pull out the bag of the receipts I do have and look them over...already I can tell that what I put down for monthly gas ($200) is more than what I actually did pay in the last two months...but that is such a variable!

[momofthree]

Now I'm getting more anxious about everything to do with the expenses! I don't have tons of receipts and can't "prove" everything I put down...and I still don't quite "get" how to handle what I didn't spend on before but do want or need to spend on going forward!

I'm actually thinking maybe we should wait for me to get more expenses... but then I would have the problem of not filing before the 30 days of the creditor judgment against me so it would be permanent (lawyer said "no problem" if we file within 30 days)... jeez I just HATE this!!!

I am getting a life insurance quote tomorrow...I was going to ask the attorney tomorrow if I should do it but I think I just will. Don't know if it's for life or term...at 62 I guess term probably makes more sense but my mother lived to 99....

I was so happy Friday when lawyer said "there is no bar to you filing Ch 7" but of course lawyer is relying on validity of all my expenses. I'm going to pull out the bag of the receipts I do have and look them over...already I can tell that what I put down for monthly gas ($200) is more than what I actually did pay in the last two months...but that is such a variable!

The tt is not going to question $200 in gas each month. You won't be asked to prove that. He will be looking for expenses that are extraordinarily high for your area and family size. If you put down that you spend $300 on clothing or $800 on food as a single person, that will probably be questioned.

To give you a good idea of what will stand out and what is considered "reasonable and acceptable" check out the IRS standard living expenses found here: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

If you want, you can even post your schedule J expenses here and we could point out anything that looks "off."

[AngelinaCat]

As far the bank statement goes, we were told to have as close to '$0.00' in our account as possible on the day we filed. We were actually at a negative balance that day, so we were fine. A screen print of your account that day should be fine, if you do your banking online.

[discouraged]

I had to supply 6 months of bank statements for verification of expenses. I think that's common. Yes, go by what the guidlines are but keep in mind that with these statements you are verifying what you say you are spending. THAT scared me enough to be totally honest, although I am an honest person, it made me really think about what I was putting down on paper.
Here are some of the things we put down:
Mortgage, utilities, water & sewer, telephone, other (garbage collection) home maintenance, food, clothing, laundry & dry cleaning, medical & dental, transportation, recreation (newspapers, magazines, movies, etc), charitable contributions, insurance (car, health)

Some -food & clothing, we took from the guidelines, because of course I was not spending much on either and these were not questioned. It was a look ahead at what I should/would have been spending. So yes, it seems to me you could add your drugstore purchases.

BUT - I am (and was) unemployed so my expenses far exceeded my income. Just look over your monthly statements and you'll probably see things you forgot. And good luck. What a relief when it is all over!

[LadyInTheRed]

Now I'm getting more anxious about everything to do with the expenses! I don't have tons of receipts and can't "prove" everything I put down...and I still don't quite "get" how to handle what I didn't spend on before but do want or need to spend on going forward!

I'm actually thinking maybe we should wait for me to get more expenses... but then I would have the problem of not filing before the 30 days of the creditor judgment against me so it would be permanent (lawyer said "no problem" if we file within 30 days)... jeez I just HATE this!!!

You are very unlikely to have to prove every expense. There is no reason to delay filing in order to justify your expenses. If the expenses you list are reasonable, they are not going to be questioned. Do your best to come up with a reasonable budget and tell your attorney that you don't have evidence of all of the expenses. Your attorney will let you know if the trustee is likely to object to any of your expenses. My attorney told me that my medical expenses were pretty high and that I should be prepared to support them. I never had to.

Re-read the following responses. They contain excellent advice. Try to relax and work on a list of expenses for your attorney's review. In a few months, you will probably be laughing at how worried you were about this.

Seems like your on track. What your lawyer is saying is a very valid point. Go "find" the exspense you might have overlooked. Your lawyer is a professional and he knows what your local BK goes by and looks for. If he is saying go get some more exspense I would. This is from a BK7 filer with over 100K year income and everything was discharged.

The tt is not going to question $200 in gas each month. You won't be asked to prove that. He will be looking for expenses that are extraordinarily high for your area and family size. If you put down that you spend $300 on clothing or $800 on food as a single person, that will probably be questioned.

To give you a good idea of what will stand out and what is considered "reasonable and acceptable" check out the IRS standard living expenses found here: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

If you want, you can even post your schedule J expenses here and we could point out anything that looks "off."

[nickifan]

Okay, just got the budget from attorney. Monthly net income (income minus expenses) stands at $290.

Higher than attorney would like, I'm assuming.

Here's some of what I put down initially that may need the "tweaking" lawyer referred to:

Food: $225 (I'm single)
Clothing: $30 (looks like IRS guidelines are higher?)
Laundry/dry cleaning: $10
Medical/dental: $20 (I'm thinking to bump this up, but it gets into the "future anticipated expenses" more than what I've spent so far this spring, which is $941. ($160 optometrist; $150 M.D., $189 dentist visit, $450 payments so far on dental crown. ) But I see that my $941 divided by 12 is $78...so is that a reasonable change, for starters? Buit...if we file by end August, then are only the expenses incurred thru end July applicable???

"Transportation" (I'm assuming that's gasoline and parking fees) says $255.
"Recreation, clubs entertainment, newspapers, mangazines" $50. I think that's the figure I provided for "dining out." Fair enough? Bump up??

Charitable contributions: $20 ( When I do go to church (don't belong to one, only repeat visitor) I put $5 cash in basket. Shall I suddenly become a bit more generous??

"Home maintenance" is $5...remember I rent so most repairs are handled by leasing office.
I bought my own wasp spray to deal with balcony intruders...

There's also a category lawyer has provided as "exhibit to Schedule J" of "Itemized personal expenses', for $102.65. It includes:

AAA membership - prorated to $5 a month. (I think as a single woman driver this is a necessity, but that's me.)
Postage - $4 (I probably buy an $8.80 booklet of stamps every two months)
Cell phone $10 (pay as I go, guesstimate)
Pet care - $48 (canned food, dry food and litter for two cats - this does not include vet bills because I haven't taken them in two years -- again, that's a "future" expense -- how to handle??)
Newspaper - $4 ($1 per sunday paper delivery)
Magazine and website subscriptions - $6.65 (prorated annual firewall subscription and a print mag subscription)

I have renters and auto insurance and will add life insurance tomorrow. My Internet is provided with my landline package.



Lawyer's list of "often overlooked expenses" include
Auto: tires, washes (you're allowed a $5 car wash??)
Eye glasses; contacts & Solutions (I think I can add $21 or so there for the weekly enzyme, daily disinfecting, eye itch drops); Non-Prescription meds - (antacids, toothpaste & floss, pain killers, cold and sinus, vitamins) - I think I will bump up by $25 for the eye health vitamins I just ordered - a month's supply.
There's also a category for Children's activities (scouting, school uniforms, etc. but I don't have kids) and Cigarettes (this kills me, a vice I don't have I could EXPENSE??)
There's also "work expenses." I take my packed lunch daily... and dry cleaning is covered elsewhere... I don't see my $25 haircut anywhere, maybe that can go here??

Anyway...all thoughts appreciated and sooner than later...I should get something to lawyer tomorrow who wants to meet midday Tuesday and review and file!! I am also going thru a bunch of Walgreens, Krogers, CVS, and dept. store and dollar store receipts too.

Thanks so much.

[AngelinaCat]

I don't see a 'Personal Grooming' category, unless you have called it something else and I missed it. 'Personal Grooming', or similar phraseology is what you spend on yourself for such things as haircuts. I spend about $35.00 every eight weeks for a 'wash, cut, and blow-dry'. And that is with using coupons. And we are in the 'po' neck of the woods. Anything beyond the simple cut and blow dry will add up fast.

You will be required to take a per-counseling course before you file. I advise going to one in your local area where you can sit down with a live person and go over your income and outgo statements, and help you to arrive at which chapter you should go. It was this counselor that looked at us and said, "Who does your hair? How do you pay for it?"

Duh! We had totally overlooked 'Personal Grooming'.

It was the counselor that told us that with our income and outgo, we were better suited for a Ch7, rather than the Ch13 we were trying for. Then, when I lost my FT job, the Ch7 was the only way to go.

Good luck to you!

[Bell30656]

The bankruptcy attorney that I chose looked over my forms, told me that I needed to purchase a more reliable car. When I asked him what he meant by that, he said that a car with a $350 - $400 per month payment should be reliable enough. He must have known what he was talking about because we sailed through the hearing and the process.